Have you ever stopped to watch a stock market finance news aggregator over a weeks time? If you ever have you would notice that it’s not uncommon to see an article on Monday saying the stock market will collapse. On Tuesday, the S&P 500 is going to 3000. On Wednesday, we are going to have a melt up of historically slow raises of stocks. On Thursday, we are going to have a melt down. Friday well, sometimes you hit that special day where one article says everything is going to hell in a hand basket while the next article is down talking about Dow 30,000. Heaven help you if the stock market dropped by 2% or so, they’ll start calling it a stock market apocalypse.
The Future is Unknown
The reality is that no one has a clue what the market will do this week, this month or this year. And yet if you read any one of these articles in isolation you’ll probably be fighting the urge to either sell or buy right now. Of course this click bait drives visitors, but it doesn’t really reflect reality. It’s the equivalent of a horror movie for shock and awe, but with just about the same real world impact.
Even if the news you are reading causes the market to go negative, say a poor earnings report or a report of an Enron type situation, studies have shown that you have less than a minute to a minute and a half to react to it before the market adjusts in price. So you’re likely to not benefit from the news. However, the vast majority of market prognostications don’t reflect this market impacting data, which would have to contain some new data point. Existing data points would already be priced into the market. As such, the market will go nowhere.
So, knowing this, one of the top recommendations here is to just tune it out and not even check your portfolio or financial news. This will help you to resist any urges to change your allocation if you’re so inclined. If you are not so inclined then by all means have at it, but remember to take it with the grain of salt it deserves. Staying the course is ultimately the best approach given no one can predict what will happen next in the market. See my post on index funds a few weeks ago for more on the day to day randomness of the market.
Do you read the financial news? Honestly I still do, but I do so for the entertainment value. I’m watching for the S&P 500 to go below 2100, scary stuff. Happy Halloween.